Payment plan offers from debtors: how to tell delay tactics from genuine repayment
Why debtors offer payment plans
A payment plan can be a genuine attempt to repay a debt over time when immediate payment is not possible. It can also be a way to slow down collection while the debtor moves money, prioritises other creditors or avoids formal recovery altogether.
From the outside, both offers can look identical: regular instalments, expressions of goodwill and a promise that payment will follow. Your job is to separate the two before you commit to waiting.
Run the numbers on the proposed plan
Start with the arithmetic. If the debt is fifty thousand dollars and the debtor offers two hundred dollars per week, that plan runs for nearly five years. By that time the business owing the money may no longer exist, your own cash position may have deteriorated and the debt may be harder to recover through any other means.
A realistic plan clears the debt within a timeframe that reflects the amount owed and the debtor's actual capacity. An unrealistic plan keeps you waiting indefinitely while your options narrow.
Insist on a written agreement before you wait
A genuine payer will agree to document the plan in writing. The written agreement should record the total amount owed, the instalment amount and schedule, and what happens if an instalment is missed.
A debtor who resists putting the arrangement in writing, keeps the terms vague or changes the story when you ask for confirmation is signalling that the plan may not be genuine. Do not accept a verbal promise and assume the plan will hold.
Watch whether payments actually happen
The first payment or two may arrive to show good faith. Then the payments stop and the excuses begin. Each follow-up is met with a new reason and a promise that the next payment is coming.
That pattern is a warning. If instalments stop or become irregular early in the plan, do not wait months hoping things improve. The longer you wait under a plan that is not being honoured, the older the debt becomes and the harder recovery may be.
Check the debtor's trading position
If the business owing you money is visibly struggling, suppliers are cutting them off, jobs are drying up or staff are leaving, a payment plan may simply be managing cash flow at your expense while the business slides toward insolvency.
Ask yourself whether the debtor's business can realistically meet the instalments over the life of the plan. If the answer is uncertain, the plan alone is not enough protection.
Do not let the plan close off your other options
The biggest mistake is accepting a payment plan, doing nothing else and then discovering six months later that the payments have stopped, the debtor company has closed and your options have narrowed.
Waiting is not a neutral act. Every week that passes can affect what you are able to do. If you agree to a plan, get it in writing, keep your other legal options open and continue to monitor the situation. If the debtor misses payments or the plan is clearly not working, do not wait for it to collapse completely before acting.
Get advice on what else should be in place
Depending on the amount owed, the debtor's circumstances and the stage the debt is at, there may be steps you can take alongside a payment plan to protect your position if the plan fails. That might include security arrangements, formal agreements or other measures that preserve your ability to recover the debt if the instalments stop.
If someone has offered you a payment plan and you are not sure whether to accept it, contact us. We will help you assess what the plan actually means, whether it is realistic and what you should do to protect your position while the plan is running.